3. MARKETABLE SECURITIES AND INVESTMENT OTHER SECURITIES

6 Months Ended

Mar. 31, 2019

Marketable Securities [Abstract]

MARKETABLE SECURITIES AND INVESTMENT OTHER SECURITIES

The Company may, from time to time, enter into contracts where a portion of the consideration provided by the customer in exchange for the Company's services is common stock, options or warrants (an equity position).  In these situations, upon invoicing the customer for the stock or other instruments, the Company will record the receivable as accounts receivable other, and use the value of the stock or other instrument upon invoicing to determine the value. If there is insufficient data to support the valuation of the security directly, the company will value it, and the underlying revenue, using the estimated fair value of the services provided. Where an accounts receivable is settled with the receipt of the common stock or other instrument, the common stock or other instrument will be classified as an asset on the balance sheet as either an investment marketable security (when the customer is a public entity) or as an investment other security (when the customer is a private entity). 

 On June 23, 2017, I’M1 and EE1 in aggregate exercised a warrant for 1,600,000 shares of common stock for services delivered to a customer and accounted for this in Investment other securities. The common stock was issued to the Company’s subsidiaries I’M1 and EE1. The customer is a private entity and the stock was valued at $912,000, which was based on its recent financing in June 2017 at $0.57 per share. The Company has classified this common stock as Level 3 for fair value measurement purposes as there are no observable inputs. In valuing the stock the Company used the fair value of the services provided, utilizing an analysis of vendor specific objective evidence of its selling price. In August 2017, each of I’M1 and EE1 distributed the shares to its majority owner, Level Brands, and also distributed shares valued at $223,440 to its non-controlling interests. In August 2017, the Company also provided referral services for kathy Ireland® Worldwide and this customer. As compensation the Company received an additional 200,000 shares of common stock valued at $114,000 using the pricing described above. The Company assessed the investment and determined there was not an impairment for the period ended March 31, 2019.

On September 19, 2017, I’M1 and EE1 in aggregate exercised a warrant for 56,552 shares of common stock for services delivered to a customer and accounted for this in Investment other securities. The common stock was issued to the Company’s subsidiaries I’M1 and EE1. The customer is a private entity and the stock was valued at $56,552, which was based on all 2017 financing transactions of the customer set at $1.00 per share, with the most recent third party transaction in August 2017. The Company has classified this common stock as Level 3 for fair value measurement purposes as there are no observable inputs. In valuing the stock the Company used factors including financial projections provided by the issuer and conversations with the issuer management regarding the Company’s recent results and future plans and the Company’s financing transactions over the past twelve months. The Company assessed the investment and determined there was not an impairment for the period ended March 31, 2019.

In November 2017, the Company completed services in relation to an agreement with SG Blocks, Inc. (NASDAQ: SGBX). As payment for these services, SG Blocks issued 50,000 shares of its common stock to Level Brands. The customer is a publicly traded entity and the stock was valued based on the trading price at the day the services were determined delivered, which was $5.09 per share for an aggregate value of $254,500. The Company determined that this common stock was classified as Level 1 for fair value measurement purposes as the stock was actively traded on an exchange. From November 7, 2018 thru December 13, 2018, the Company sold the 50,000 shares held and recorded a realized loss on marketable securities of $25,673 as of December 31, 2018 in the consolidated statement of operations. The Company no longer has this equity position.

In December 2017, the Company completed services per an advisory services agreement with Kure Corp, formerly a related party. As payment for these services, Kure Corp issued 800,000 shares of its stock to Level Brands. The customer was a private entity and the stock was valued at $400,000, which was based on financing activities by Kure Corp in September 2017 in which shares were valued at $0.50 per share. The Company had classified this common stock, cumulative value

of $400,000, as Level 3 for fair value measurement purposes as there were no observable inputs. In valuing the stock the Company used factors including information provided by the issuer regarding their recent results and future plans as well as their most recent financing transactions. On April 30, 2018, Kure Corp. merged with Isodiol International, Inc. (CSE: ISOL, OTCQB: ISOLF, FSE:LB6A.F), a Canadian company. Details can be reviewed in our Form 10-K previously filed. As a result of this merger we received the first issuance of 380,952 shares from Isodiol and valued them based on the trading price on April 30, 2018 of $0.63 per share which totaled $240,000. We also removed the value of the Kure equity of $400,000 from our Level 3 investments as part of the exchange described above. As the full value of the Kure equity will not be received until the future issuances based on earn out goals, we have recorded an accounts receivable other of $160,000 as of December 31, 2018. On March 31, 2019, Isodiol spun off Kure to its original shareholders by issuing back all original Kure stock. As a result of the spin off, the Company will receive 800,000 shares of Kure stock valued at $160,000 and as Kure is private, the shares will be treated as a Level 3 stock and will be accounted for against the $160,000 accounts receivable other. The Company has determined that the 800,000 shares have a fair market value over $160,000. The Company has assessed the common stock and determined there was not an indication of an other-than-temporary impairment at March 31, 2019.

On December 21, 2017, the Company purchased 300 shares of preferred stock in a private offering from a prior customer for $300,000. The preferred shares are convertible into common stock at a 20% discount of a defined subsequent financing, or an IPO offering of a minimum $15 million, or at a company valuation of $45 million whichever is the least. The customer is a private entity. The Company has classified this common stock as Level 3 for fair value measurement purposes as there are no observable inputs. In valuing the stock the Company used the value paid, which was the price offered to all third party investors. As of March 31, 2019, the Company has determined there is no impairment on the value of the shares of stock.

On December 30, 2017 the Company entered into anAgreement with Isodiol International, Inc. (CSE: ISOL, OTCQB: ISOLF, FSE:LB6A.F), a Canadian company which is a developer of pharmaceutical grade phytochemical compounds and a manufacturer and developer of phytoceutical consumer products. As payment for these services, the Company has received 1,226,435 shares of Isodiol common stock between December 31, 2017 and January 2019. The Company also received 38,095 shares of Isodiol stock upon Isodiol’s acquisition of Kure Corp, giving the Company a total of 1,264,530 shares. During the three months ended March 31, 2019 we sold 110,636 shares of Isodiol stock and recorded a realized loss of $185,834. As of March 31, 2019 we have 1,153,894 shares of Isodiol stock. At March 31, 2019 the Isodiol shares were valued at $1.19 per share, and we recorded $557,193 and $(996,110) as unrealized gain (loss) on the Company’s consolidated financial statements for the three and six months ended March 31, 2019, respectively. This investment is accounted for as a cost method investment.

On June 26, 2018 Level Brands entered into an Agreement with Boston Therapeutics, Inc. (OTC: BTHE), a pharmaceutical company focused on the development, manufacturing and commercialization of novel compounds to address unmet medical needs in diabetes. The agreement involved a licensing agreement and required the Company to create IP for a branding / marketing campaign. As payment for these services, Boston Therapeutics agreed to pay $850,000, of which $450,000 was issued as a note due no later than December 31, 2019 and $400,000 to be paid thru the issuance of BTI common stock based on the trading price at the agreement date ($0.075). As the stock has not been issued, we have recorded an unrealized gain (loss) of $53,333 and ($186,667) for the three and six month periods ended March 31, 2019, respectively based on a trading price of $0.04 at March 31, 2019.

The table below summarizes the assets valued at fair value as of March 31, 2019:

	In Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs  (Level 2)		Significant Unobservable Inputs  (Level 3)		Total Fair Value at March 31, 2019
Marketable securities	$	1,373,133		-	$	-	$	1,373,133
Investment other securities		-		-	$	1,159,112	$	1,159,112

	Level 1			Level 2		Level 3		Total
Balance at September 30, 2018	$	1,050,961		$	-	$	1,159,112	$	2,210,073
Sale of equities	$	(200,000	)	$	-	$	-	$	(200,000	)
Change in value of equities	$	(132,303	)	$	-	$	-	$	(132,303	)
Balance at December 31, 2018	$	718,658		$	-	$	1,159,112	$	1,877,770
Sale of equities	$	(103,998	)	$	-	$	-	$	(103,998	)
Receipt of equity investment upon completion of services	$	470,000		$	-	$	-	$	470,000
Change in value of equities	$	288,473		$	-	$	-	$	288,473
Balance at March 31, 2019	$	1,373,133		$	-	$	1,159,112	$	2,532,245